Fiscal Stability & Integrity

Washington DC’s fiscal health is stable but weaker than it has been in some time. The economic recession, particularly its detrimental impact on the commercial real estate sector has sharply reduced revenue growth that previously had been driven by increased demand for and investment in downtown office space. At the same time, city spending has been slow to adjust to the new revenue environment, forcing city leaders to utilize city reserves over the past few years.

Today, while budget deficits continue to threaten, city reserves are now at levels that make it necessary for local leaders to find savings and efficiencies in the government’s operations or consider new revenue opportunities. The challenge for the FCC is to assist the city in identifying and implementing the necessary measures to ensure that the city is positioned to emerge from the recession with a strong financial foundation.

As the city strives to maintain its fiscal health and integrity, it is important to ensure that this is done in the context of home rule, where the local elected leadership and D.C. residents decide on the best ways to accomplish their goals. Over the past decade, the District has worked hard to increase its legislative and budget autonomy while fighting for the voting rights of residents; these efforts go hand-in-hand. With a new Republican majority in the U.S. House of Representatives, there are concerns and, in fact, some evidence that the new leadership will begin to involve itself with issues that are decidedly local in nature. It is the responsibility of the Federal City Council to continue to work with other like-minded organizations to preserve and enhance the District’s autonomy.

The FCC could help ensure the District’s fiscal stability and integrity with initiatives in the following areas:

Operational transformation

In the current fiscal climate, it is important that the city strive to do more with fewer resources. The Federal City Council will work with city leaders to identify efficiencies in the city operations and to improve transparency. This effort would begin by benchmarking city operations against comparable cities in order to identify areas where the city should look to improve operations and generate savings. Once these areas are identified, the city must prioritize the opportunities for improvement and growth, develop an action plan to realize these goals, and begin to execute this plan within the structure of the DC government. Such an effort would involve identifying improvements to procurement, tax collection, energy purchasing and other similar measures that could help generate near-term and long-term savings. The focus must be on maintaining or improving service delivery but at the same or lower cost.

Proposed Outcomes:

Effective benchmarks for city operational spending and growth based on best practices
Strategy to eliminate city’s projected multi-year budget deficit
Framework for city leaders and administrators to guide budget planning and operations in the current austere funding environment
Continued city reputation for fiscal responsibility.

Medicaid

According to a recent report from DC’s Chief Financial Officer, the city has had to write off approximately $350 million in Medicaid reimbursements over the past decade due to a failure to provide proper documentation for the Medicaid-eligible services provided through various city agencies. In fact, the most problematic agency, the Child and Family Services Administration, has actually been prohibited from seeking reimbursements because of its dismal record in ensuring that Medicaid reimbursements are realized. DC maintains a relatively generous Medicaid program for residents, but its inability to put in place a working infrastructure has resulted in repeated problems securing the proper federal reimbursements, leaving the city to cover the gap with local funds. The Federal City Council could help secure and provide the expertise and guidance needed to assist the Department of Health Care Finance in finally solving this problem. The FCC could also assist in improving the relationship between the District and its federal partners to tackle this persistent financial problem.

Proposed Outcomes:

Over $100 million in annual savings for the city going forward by ensuring that eligible services are effectively covered by the federal government under the current Medicaid match
Federal confidence in the District’s administration of the Medicaid system in order to secure higher federal Medicaid match for the city, producing even higher levels of savings
Continued ability to provide the broad spectrum of Medicaid- eligible services to District families and individuals in need.

Special Education

The city continues to spend approximately $250 million per year in tuition costs, transportation, litigation, and administrative costs to provide services for students with special needs who cannot be served within the current public school system. For a fraction of the cost, the city can build additional capacity (whether as added space to neighborhood schools or as stand-alone facilities) within the city limits, so that these students can be served within their home learning communities. The Federal City Council could work with DCPS to help build and finance new DC special education facilities that would be designed and operated by high-quality special education providers. The primary goal would be to provide high-quality services in the city and to shift resources that currently go toward non-public tuition or transportation toward quality of DC special education schools as well as “traditional” schools.

Proposed Outcomes:

Capacity to deliver best-in-class services to an additional 2,200 children with disabilities who are currently served outside the city
Opportunities for inclusion for students who have the potential to participate in the general learning environment with non-disabled peers
Opportunities for youth to develop skills to participate in the workplace, live independently, and engage in their communities
Hundreds of new construction jobs and education-related jobs at each state-of-the-art facility, most of which should go to DC residents
High-quality training opportunities for special education teachers throughout the public school system
Significant savings for the city that can be redeployed to improve education quality in the public school system as well as fund other important city priorities.

Education budgeting and funding

There is currently an opportunity to help improve the financial systems within DCPS. In the past few years, it has become clear that school leaders do not have timely and dependable financial information to help guide critical decisions about staff, services, and programs. This situation has been exacerbated by turnover at the DCPS CFO level; to date, a permanent DCPS CFO has yet to be identified and put in place. The Federal City Council could assist the city with selection of a strong agency CFO and then lend its expertise and resources to fixing the financial systems that will enable the DCPS leadership team to control the agency’s budget and do sound financial planning. In addition, the Federal City Council can be a leader in helping produce a budget comparison between DCPS and the charter school sector in order to answer pertinent questions about the distribution of resources between the two school systems.

Proposed Outcomes:

A more transparent and useful financial system within the public school system to guide real-time decision-making, including decisions related to hiring/firing, shifting resources between programs, or maintaining the school system’s building inventory
A more effective financial data platform from which to build the annual budget and better communicate budget priorities to stakeholders
Opportunity to make objective comparisons in assessing funding differences between individual schools within DCPS or across DCPS and the public school sectors
More public confidence in the education system and the funding generated to support education reforms and improvements.